Jan24 Archives - Page 9 of 15

Should I Lease or Finance a Car?

Choosing between leasing or financing a car will depend on your needs and circumstances. In both instances, you’ll be able to use a vehicle as you pay a series of pre-determined monthly instalments – but the main difference between leasing and financing a car is whether or not you end up the vehicle’s owner.

As such, there’s no right or wrong answer to the question of whether you should lease or finance a car – it’s all about your priorities. Read on to find out more.

Car leasing and car financing – what’s the difference?

Leasing and financing a car may sound similar, but they do have key differences.

The main difference between leasing and financing a car is ownership. When you lease a vehicle, you’re essentially borrowing the vehicle from a dealer for a specified period of time – usually anywhere from 12 months up to 60 months. You’ll pay a monthly fixed amount which usually includes service and maintenance fees. At the end of the lease’s term, you hand the car back – you’re never its owner.

With car financing, however, you have the option of owning the car at the end of your finance term. Much like leasing, you’re making a series of fixed monthly repayments over a pre-agreed time period, after which time you have the option of making a final payment, making you the car’s legal owner.

Buying a car outright is the other option when buying a car – but you need savings or a personal loan in order to finance this.

Should you lease or finance a car?

As with anything, whether or not leasing or financing a car is most appropriate for you will depend on your priorities and preferences.

Leasing a car – the advantages

When you lease a car, your monthly repayment amount will typically cover service and maintenance costs.
As you are never the vehicle’s owner, you don’t have to worry about the car depreciating in value over time.
If you like to change your car frequently, leasing is a far more appealing option.
Because you won’t own the vehicle, you also don’t have to worry about reselling it at the end of the lease term.
If you use your car for business purposes, you may benefit from greater tax write-offs with a lease (unless it’s a luxury vehicle).

Leasing a car – the disadvantages

There’s usually a mileage limit for leased cars, and you do have to pay a penalty if you exceed this, so if you’re a driver of long distances, leasing may not be for you.
Although service and maintenance costs are covered, if you cause any serious damage to the vehicle, you may incur further charges.
You don’t ever own the vehicle.
You may also incur charges if you want to end the lease deal early.

Financing a car – the advantages

Car financing tends to be more flexible than leasing a car. Similar to leasing, you can use the length of the agreement, and you may be able to decide on an annual mileage limit and deposit amount.
Car finance is typically available on both new and used cars, whereas leasing is only available for the newest vehicles.
If you’re after the lowest possible monthly repayments, car finance on a used car is the best option.
At the end of car finance, you’ll own the car. Depending on which finance you’ve gone for, you may need to make a final payment, after which you are the car’s legal owner.

Financing a car – the disadvantages

With PCP finance, you can choose whether or not you want to own the car at the close of your deal. However, as with leasing, if you opt to return the car, but have exceeded the mileage limit or caused excessive damage to the car, you will incur extra charges.
You are locked into a repayment schedule, so you need to ensure that your financial circumstances aren’t likely to change whilst you’re repaying your car finance. Missed repayments will affect your credit score – though there are ways of securing car finance even with a poor credit rating.

Talk to us about car financing and leasing

If you still have questions about whether car finance or a car lease is best for you, get in contact with My Car Credit on 01246 458 810 or email enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

What’s the Cheapest Way to Finance a Car?

Car finance is an accessible way to purchase a vehicle. Whether you’re after a new or nearly new vehicle, there are various different kinds of car finance that can help you drive off into the sunset with minimal stress. In this post, we’ll explore them in a little more detail to determine the cheapest way to finance a car.

Financing a car – the cheapest options in the UK

Purchasing the vehicle itself is likely to be the steepest cost, but you should also consider other costs like running and maintenance fees, as well as any interest rates or other costs you may be required to pay. Here are the basics on each method of financing a car.

Cash

The cheapest way to finance a car is with one up-front payment. As a cash buyer, you’re able to fund the entire cost of the car immediately, meaning that you’ll own the vehicle outright. Being a cash buyer means you’re invulnerable to any interest rates, monthly loan repayments, or having to repay more on a finance agreement than the car is worth. You can also sell the car at any time.

However, you do have to be able to fork out what the car is worth in one go – which is a lot more than most individuals can afford. It also means you are entirely responsible for any servicing and maintenance costs.

Personal loans

Personal loan rates are nearing an all-time low, and are therefore the next cheapest way to finance a car after cash purchases. With personal loans – or unsecured loans – you’ll borrow a fixed sum which you’ll repay over a pre-determined amount of time (usually one to seven years) and will also pay interest at the same time.

If you have a good credit score, personal loans can be secured with relative ease, and by shopping around and comparing the APR, you can secure a competitive rate. You’ll be the legal owner of the vehicle, so can sell it whenever you want, but monthly repayments of a personal loan can be higher than with alternative car finance.

Finding the cheapest car finance

If neither of the above are viable options for you, there are alternative ways to get a car finance quote and secure a deal that suits you to save money. Be aware that you will likely receive better deals and cheaper monthly payments if you have a good credit score, but you can find a car finance company that will still accept you if your score is less than ideal.

Below we’ll run through three car finance options that are popular in the UK.

Hire purchase agreements (HP)

If you’re struggling to get a cheap personal loan, a hire purchase agreement may be for you. You won’t own the vehicle until you’ve made the final repayment – the car is used as an asset against the loan. As such, if you fail to make your repayments, the lender has the right to repossess the vehicle. A hire purchase differs from other options in this way.

You’ll typically make a deposit of around 10% (although there are no-deposit options) and from then on, you’ll have a series of pre-determined monthly repayments. These can, depending on the agreement, be low monthly payments. If you want to own the car outright at the end of the term, a HP agreement is a good route to take. Repayment terms are flexible, you’ll often be offered competitive fixed interest rates, there aren’t usually any mileage caps, and a hire purchase agreement is easier to be approved for than other car finance.

Personal contract purchase (PCP)

Personal contract purchase is another popular car finance option. If you’re hunting for the cheapest way to finance a car outright, PCP might not suit. But if you’re a fan of chopping and changing vehicles, this option is ideal.

PCP finance deals often have low deposits as well as flexible repayment terms with low monthly payments. That’s because you only cover the cost of a car’s depreciation, plus interest, when paying the finance company each month.

PCP explained

You can choose to own the car at the end of the finance term, in which case you’ll make one final payment. This lump sum is known as the balloon payment, often much larger than your other monthly payments. If you don’t make the final balloon payment, you can simply hand the car back to the dealer with the option of upgrading to another new car.

The key difference here is that lenders know they might be getting the car back. As a result, it’s common for them to impose mileage limits on cars to protect them from excess depreciation in their value. Limits are typically between 5,000 to 10,000 miles per year with additional payments for anything over the agreed amount.

Bear in mind that, although the monthly repayments for PCP can be lower than HP, you’ll often end up paying more overall if you want to buy the vehicle outright. If you exceed a mileage cap or cause wear and tear, you’ll also have to cough up.

Personal contract hire (PCH)

PCH is a way of leasing the vehicle – it’s essentially a long-term rental. Servicing and maintenance fees are included, though you may have to pay for car insurance and road tax separately.

There’s a mileage cap as well as an initial deposit. In many cases, PCH can work out cheaper overall than PCP as you don’t have any option to purchase the car.

With PCH leasing, you hand the car back to the dealer at the end of your finance term. Your repayments are fixed, but payment terms are flexible and you can generally change providers.

How to reduce your monthly payments

Make a larger deposit

A simple way to reduce your loan is by making a larger deposit. This cuts the amount you need to borrow, meaning less money is being spread across the agreement term. It will also minimise the amount of interest you owe your lender.

A larger downpayment also provides more security to the lender, which could get you a better rate on your loan.

Avoid all-inclusive deals

There’s no doubt about it. Paying one amount for your car makes life easier. With some providers, you can pay a single amount for the car, loan, insurance, tax, servicing, maintenance – the lot. However, you’re often charged a premium for the convenience.

If your budget is tight, you’ll typically get a better deal by arranging everything yourself. That means finding your own insurance, paying for tax and keeping up to date with servicing and maintenance to keep the car in a good condition.

Decide what you want earlier

Flexibility is a buzzword when it comes to car finance. But it does come at a cost. PCP deals offer the most flexibility as you get to decide whether or not to actually purchase the car at the end of the deal – having driven it for a few years.

If possible, it could work in your favour to make this decision before starting a loan. If you don’t want to own the car, PCH may be cheaper than PCP. If you do want to own the car, HP is often the cheapest way to pay.

Improve your credit score

Credit scores give lenders an idea of how much risk is involved in a car finance application. If all your bills are fully paid on time and you have a history of lending responsibly, you present less risk, so you could access better deals at a lower overall cost.

Take a look at our article on improving your credit score for more information.

Shop around

Last but not least, it always pays to shop around. Getting a loan or finance is no exception. Whether it’s with the bank or a specialist lender, you should never settle for the first deal you’re offered. Car finance brokers make this easier by comparing lots of deals without you having to jump through hoops over and over again.

Easily navigate the car finance market

Searching the car finance market and securing affordable car finance can feel overwhelming – but it doesn’t have to be. My Car Credit has hundreds of helpful blogs and articles for you to browse through. We also have a large network of trusted lenders to help you find the cheapest way to finance a car for your requirements. try our online car finance calculator to get the ball rolling.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance options cash cheapest hire purchase Jan24 pch PCP personal loan

What Credit Score is Needed for UK Car Finance?

Your credit score is one of the most important tools used by lenders to assess car loan applications. So, what credit score is needed for UK car finance? There’s no black-and-white answer, however, there is a lot to learn when it comes to credit scores.

Your credit score is one of the most important tools used by lenders to assess car finance applications.

As to the question of what credit score is needed for UK car finance, there’s no hard and fast answer because different car finance lenders have their own requirements.

While there’s generally no universal minimum score you need to secure car finance, your credit report will nonetheless impact your eligibility and the kinds of rates you’ll be offered. The higher your credit score, the better terms and rates you’ll benefit from.

As such, it’s sensible to compare your options with different lenders and improve your credit before applying – read on to find out more.

Understanding credit scores and their impact on car finance

A credit score is a three-digit number that reflects your reliability and trustworthiness as a borrower based on your history of credit management and use. The range of credit scores varies from ‘excellent’ to ‘very poor’.

Lenders will use your credit score to evaluate your risk as a lender. The higher your score, the better the terms and rates you’ll benefit from, and you’ll likely be eligible with a wider panel of lenders.

Your credit score is calculated based on several factors. These include payment history, the percentage of your credit you’re using, the length of your credit history, and the number of ‘hard’ credit checks on your account.

The ‘big three’ UK credit reference agencies

In the UK, most lenders use three main CRAs (credit reference agencies) to vet applicants. Each agency has its own scale that it uses to assess individuals and assign them a credit score. They also have their own custom eligibility criteria which will factor into your car finance eligibility.

Credit scoring ranges from ‘very poor’ to ‘excellent’. Most people will fall in the ‘fair’, ‘good’, or ‘excellent’ range. Anything below ‘fair’ is considered ‘poor’ and will impact the car finance rates and terms you’ll be offered.

The three main CRAs in the UK use the following credit score ratings:

	Equifax	TransUnion	Experian
Excellent	811+	628-710	961-999
Very Good	740-799	NA	NA
Good	531-670	604-627	881-960
Poor	0-438	551-565	561-720

What credit score is needed for car finance in the UK?

You can assume that your credit score rating means the following:

Excellent: You’re considered a low-risk borrower and will access the best rates and deals

Good/fair: You’ll be considered less risky than those with poor credit and will benefit from competitive rates

Poor: Your options will be more limited, but it’s still possible to secure poor credit car finance

Remember that each lender will have their own eligibility criteria beyond your credit score. For example, some lenders may prioritise proof of income, whereas others place more weight on your debt-to-income ratio.

Other factors that influence car finance approval

Your credit score is critical to determining your car finance eligibility.

That said, there are other factors that will also influence your likelihood of approval, including:

Deposit size: A larger deposit (also known as a down payment) reduces the overall loan amount, which can lower your interest rate and make you a more attractive loan candidate.

Loan term: The longer the loan term, the higher the interest rate you can face because longer loans are riskier to lenders.

Debt-to-income ratio: This measures how much debt you owe compared to your income. The higher the ratio, the riskier you are to a lender.

Stability of income and employment status: Younger applicants are riskier than those with established, stable incomes. Equally, lenders will want to check that your income matches the payments going into your account.

Can you get car finance with a low credit score?

If your credit report is less than perfect, don’t panic. It’s more than possible to secure car finance with poor credit.

Brokers like My Car Credit can help you secure favourable deals even if your credit report isn’t at its best.

We combine a wide panel of trusted lenders with a sensible approach to help you find the right agreement for your circumstances. Our tailored approach means that we may even be able to approve you for car finance where others haven’t.

That said, there are easy ways to check and improve your credit score.

How to check and improve your credit score

You can ask any of the CRAs we mentioned above for a copy of your credit report. This allows you to check your score via a soft credit check.

A soft credit check doesn’t leave a mark on your credit report. They’re only visible to you (the applicant), remaining invisible to lenders and third parties. Remember that if you choose to advance your finance application, your credit report will typically be subject to a hard search, which will leave a mark.

There are plenty of ways to improve your credit score. Some of the best strategies for improving your credit score include:

Registering on the electoral roll: Lenders will check this to check that you are who you say you are, protecting themselves against fraud.
Making timely payments: Lenders want to know you’re capable of responsibly managing your credit, and making timely payments helps to prove this.
Reducing your credit utilisation: Spread your payments across your accounts, as this process shows you know how to manage your money.
Avoiding multiple hard credit checks: Hard credit checks leave a mark on your report, and too many of them won’t be looked on favourably by lenders.

How does my credit score affect my car finance application?

Your credit score will impact your car finance application in several ways. For one, the higher your credit score, the better your eligibility for more favourable rates and terms. In other words, you can expect lower interest rates with higher credit scores.

Applicants with higher credit scores may also benefit from better loan amounts and terms, and may be able to access a broader panel of lenders. This affords more options when shopping around for a favourable, tailored car finance loan.

The role of My Car Credit in securing car finance

As part of Evolution Funding, the UK’s largest motor finance and technology provider, My Car Credit has access to the largest panel of car finance lenders nationwide.

This means we can offer personalised support to borrowers, leveraging our expertise, lender network and award-winning technology to find the right car finance for your needs and circumstances. Our goal is to help you buy the car you want at the budget you can afford.

Use our car finance calculator to assess your car finance eligibility. You’ll receive a no-obligation quote in minutes, giving you a breakdown of your expected monthly payments, typical interest rates, and total payable.

If you’re unsure about the kind of car finance that might work best for you, contact our friendly team of Car Credit Specialists today.

Frequently asked questions

Can I get car finance with no credit history?

At My Car Credit, we consider applications from drivers of all circumstances. Whether you’re a first-time motorist, self-employed, or have a poor credit rating for different reasons, we can work with you to secure car finance that accommodates your circumstances.

Will checking my credit score lower it?

Checking your credit score won’t lower it. In fact, it’s sensible to regularly check your report for free so that you can establish whether there are any potentially harmful errors that need rectifying. Plus, regularly checking your score means you’re more likely to be upfront with lenders from the get-go, reducing the risk of rejection further down the line.

Does car finance improve credit score?

Repaying your car finance in full and on time can help to improve your credit score in the long run. This can improve your eligibility for future loans, as you’ll be seen as a more reliable, less risky borrower.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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Car Finance APR: What Does it Mean?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance check car finance options credit score equifax experian Jan24 TransUnion

Can I Buy a Car with a Debit Card?

Person buying a car using their debit card

If you’ve found your dream car, have enough savings in the bank, and haven’t yet considered looking at your different car finance options, you may want to seal the deal immediately by paying with a debit card.

However, whilst this may sound like the easiest method of buying a car, it might actually come with some complications.

Can you buy a car with a debit card?

Technically, yes, you can buy a car with a debit card. Buying a car with a debit card may be advantageous for you, provided you have enough cash in your account when you make the payment. Be sure that your bank doesn’t have a cap on the card’s daily spending limit, too.

That said, it’s not quite that simple. Some dealers simply won’t accept payment via debit card. There are a number of reasons why this could be the case. Firstly, there are fees that come with this process which can result in dealers losing net profit on a sale.

Secondly, debit card payments are riskier for them. If you, the buyer, dispute the sale for whatever reason, this can cost the dealer money – particularly if you only dispute the sale once you’ve driven the vehicle, which means that it can’t then be re-sold at its initial price.

Debit card vs finance

If you do intend to pay for your vehicle with a debit card, be sure to check that the dealer accepts this payment method prior to entering any negotiation. However, most drivers will benefit from car finance as an alternative to spread the cost of a new car. Get a car finance quote today for a better idea of your budget.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

credit card debit card Jan24 monthly payments payment options

What are the Advantages and Disadvantages of Financing a Car?

Hurdles like the global semiconductor chip shortage and economic instability haven’t shackled the consumer car finance market, with the latest data from the Finance and Leasing Association (FLA) revealing more than 2 million cars were purchased using finance options like personal contract purchase (PCP) and personal contract hire (PCH) in 2021.

Over the year, FLA lenders distributed more than £37 billion in car finance loans, helping Brits get behind the wheels of everything from the latest Teslas to second-hand Minis.

Of course, like any loan it’s important to have a good understanding of exactly what you’re committing to when taking out car finance. This means taking the time to understand the advantages and disadvantages of financing a car. Want to know more? Read on as we answer all your questions about the advantages and disadvantages of financing a car, with a goal to help you make educated decisions.

Advantages of financing a car

You can stretch your budget further

When considering the advantages and disadvantages of financing a car, budget is one of the biggest factors. Instead of scraping together cash to purchase a car outright, car finance options such as PCP and PCH allow you to stretch your budget much further. Initial deposits can be as low as 10% (with plenty of no-deposit options too) and allow you to spread out the rest of your loan over a period of two to four years, sometimes longer.

Fixed monthly payments

Most car finance loans include fixed monthly payments which make budgeting easy. You’ll know exactly how much will be coming out your bank account each month, making it easy to stay on top of your loan.

Options for every credit score

Unlike mortgages and credit cards, car finance is available to most Brits. Even if your credit score is less than ideal, it’s still possible to secure loans with great terms, conditions, and interest rates. Find out more in our complete guide to car finance with a poor credit rating.

Disadvantages of financing a car

You may be subject to mileage limits

Car finance loans often include mileage caps which can restrict how you use your car. These are common with PCP agreements, where you have the option to return the car to the lender at the end of the loan. If you want total freedom when it comes to mileage, car finance options like hire purchase (HP) can be a good alternative.

You don’t necessarily own the car outright

Many car finance loans use the vehicle as security, meaning you don’t own the car outright until you’ve paid all instalments. You may also need to settle extra costs such as balloon payments or penalties for extra mileage. For many motorists, this is one of the biggest disadvantages of financing a car.

Excess wear and tear can result in penalties

As well as penalties for exceeding your mileage limit, some car finance loans will add fees for wear and tear. Everyday wear and tear is fine but anything abnormal can incur fees. This can include anything from dents and scratches to ripped seat covers.

Tips for securing the best type of car finance

No matter what type of car you’re in the market for or the state of your finances, it’s important to understand a few key points when researching the advantages and disadvantages of financing a car.

APR

First, you’ll need to understand annual percentage rate (APR). This is the interest rate you’ll pay over the lifetime of the loan. APR can vary significantly between lenders and is also impacted by factors like your credit score and deposit. Without a good rate, APR can be one of the biggest disadvantages of financing a car. That’s why it’s so important to shop around for the best deals!

Hidden fees

As a borrower, it’s your responsibility to gain a complete understanding of all fees and charges associated with your loan. Most lenders are relatively transparent, but it always pays to ask questions and do your homework. This is the best way to sign on the dotted line with confidence and ensure you don’t encounter any unwelcome surprises down the line.

Keep the big picture in mind

Rock bottom interest rates and ultra-low monthly payments are tempting but it’s important to keep the big picture in mind when it comes to car finance. Use variables like APR and repayment terms to calculate the total cost of your loan and paint a long-term picture of the advantages and disadvantages of financing a car. Generally, longer loans mean you’ll rack up more interest and ultimately, pay more for your car.

Ask for extras

If you don’t ask, you don’t get! For example, it’s not unusual for dealers to throw in free servicing for 12 months or extras like leather seats, roof racks or an upgraded sound system when selling new cars. Similarly, just because you’re purchasing a car on finance doesn’t mean you can’t push for a discount on the advertised price of the car. Of course, there are no guarantees but if you approach the situation with a smile and a good attitude, chances are it’ll pay off.

Enlist the help of a broker

There’s no shortage of car finance lenders in the UK and like all industries, some are legions better than others. Enlisting the help of a broker can help you sift through the options and secure the best deals.

With access to the largest panel of car finance lenders in the UK, My Car Credit matches you with the best loan based on your unique borrower profile. This personalised approach boosts your chances of success and helps secure you the best type of car finance. Connecting with a broker can also help you understand more about the advantages and disadvantages of financing a car and ultimately, make better choices.

Want to know more about the advantages and disadvantages of financing a car? We’re always available to answer questions via email or give us a call on 01246 458 810 to chat with one of our car credit advisors.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance options Jan24

How to Finance a Car with Poor Credit

You don’t need an ‘excellent’ credit rating to take advantage of car finance payment plans. If you have a lacklustre score and want to know more about how to finance a car with poor credit, we have answers.

Read on to find out how to get car finance with poor credit rating in three easy steps:

Step 1: Find your credit score

Your credit score plays an important role in determining how much you can borrow, as well as the terms and conditions of your loan. It offers lenders an overview of your borrowing habits and helps establish the level of risk associated with your loan. Credit scores are calculated using a range of factors, including credit card payments, outstanding loans, previous finance applications and direct debits currently in your name. We recommend Experian to find your credit score.

The latest data from Money Supermarket is a good place to start when looking for a benchmark. The platform uses TransUnion as a credit reference agency, with scores ranging between 0 to 710. Scores of between 566 and 627 are considered ‘good’ while scores of 628 or more get you into the ‘excellent’ category. The average Brit has a credit score of 573, according to a survey conducted in December 2021. This is slightly higher than the 569 average recorded in December 2020, which suggests credit scores are on the rise.

Of course, not all Brits enjoy an ‘excellent’ or even ‘good’ credit rating. If you’re hovering around the 550 or lower range, you could fall into the ‘poor’ category. Don’t worry, this isn’t game over and you’re definitely not alone. Thousands of Brits have poor credit ratings, with the North West and North East of England recording some of the lowest averages.

While poor credit history is often considered taboo, there are all kinds of reasons why you may have a less-than-perfect score. Things like minor mortgage defaults and outstanding bills can bring down your credit rating. You might also be given a flat score if you haven’t built up a credit history yet or you’re self-employed and have difficulty proving your income. Whatever your unique situation, don’t let your ‘poor’ rating drag you down just yet.

Step 2: Crunch your numbers

After establishing your credit score, it’s time to crunch your numbers. Our car finance poor credit rating calculator is a quick and easy way to do the maths and get an idea of what types of numbers you’re looking at. It’s quick, easy, and most importantly, stress-free. The last thing you want when you’re researching how to get car finance with poor credit rating is a headache. That’s why we’ve created this calculator to streamline the process and give you results in a matter of clicks.

All you need to do is enter your preferred loan amount, repayment terms and finally, your credit rating. There’s no impact on your credit score, so don’t worry about pushing your rating even lower. After you’ve punched in the numbers we’ll generate your expected monthly payments, as well as what typical APR rate to expect.

Our goal is to make your experience as easy and transparent as possible, which is why we also include the loan amount and total payable figure. No blurred lines here. Just simple, easy to interpret numbers. If you want to know more about how to finance a car with poor credit, simply hit the ‘apply now’ button and follow the next steps.

Step 3: Secure a lender

You’ve established your credit score and crunched the numbers. Now it’s time to secure a lender. There are loads of options out there and it pays to shop around and find a lender that suits your unique needs.

Here’s some tips on how to secure the best car loans from top lenders in the UK:

Look for brokers with good connections

One of the best ways to improve your chances of securing car finance with poor credit is to enlist the help of a broker. Working with an established financial services platform is an easy way to browse the market and track down the best deals, without having to do a huge amount of groundwork.

Brokers can be a godsend but it’s worth noting that not all offer the same customer-focused, results-driven services. When you choose My Car Credit, you’re unlocking access to one of the largest panels of lenders in the UK. We’re part of Evolution Funding, the UK’s biggest and most trusted motor finance broker.

In addition to a wide panel of trusted lenders, we use purpose-built technology to track down the best deals. This means we’re often able to secure approval for car finance where other brokers have failed. If you’re researching how to finance a car with poor credit, it’s hard to find a better solution.

Remember, all circumstances are considered

Ruling yourself out too early is one of the biggest mistakes you can make when researching how to finance a car with poor credit. A good car finance platform should consider all circumstances, regardless of how low your credit score is. Often, there’s more to the story than meets the eye.

At My Car Credit, our passionate team of auto finance advisors are here to dig deep into your finances and secure you the best possible loans and interest rates from our panel of lenders, no matter what your credit score. Every case is assessed individually, with zero judgement. Our goal is always to find the best car loan for your unique circumstances. With access to a large panel of trusted lenders with options for all kinds of applicants, we’re well-equipped to do just this.

Want to know more about how to finance a car with poor credit? Get in touch via email or give us a call on 01246 458 810 to discuss your car finance options and learn more about how to get car finance with poor credit rating.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

bad credit Jan24 poor credit

6 Types of Car Finance in the UK

Car finance is one of the most popular ways to purchase vehicles in the UK, with Brits pouncing on benefits like low interest rates, affordable monthly repayments and flexible terms. While all types of UK car finance are designed to get you behind the wheel of a new car faster, there are some important differences to understand before you commit to a contract. With a good grasp on car finance options in the UK, you can get the most out of your loan and enjoy all the benefits, with zero stress.

1. Hire Purchase to Own a Car Outright

Hire purchase (HP) is one of the simplest UK car finance types.

What happens with hire purchase?

HP allows you to spread the cost of the vehicle over a set period of time, with repayments usually made monthly. At the end of the hire purchase agreement, you’ll own the car outright, with nothing more to pay. Deposits aren’t always required, though they can help reduce your interest rate and monthly payments.

Hire purchase costs and terms

To calculate the total cost of your hire purchase agreement, simply take the price of the car, minus the deposit and add interest. You may also be liable for administration and transfer rights fees at the end of the loan, which are worth factoring in. Most hire purchase agreements span for between three to five years, although this can vary. Monthly payments are fixed, making it easy to budget and plan around your loan.

2. Conditional Sale Car Finance Agreement

Similar to a HP agreement, conditional sale loans are a great option if you want to own your car outright at the end of the contract.

What to expect from a conditional sale

Fixed monthly payments are a little higher though there are no additional fees at the end of the agreement. Deposits are usually 10% of the car’s value and repayment terms can be anywhere from two to six years, allowing for plenty of flexibility for a brand-new car.

Conditional sale vs hire purchase

What’s the difference between hire purchase (HP) and a conditional sale? Sometimes, the terms are used interchangeably. However, conditional sales specifically include a condition that you don’t own the vehicle until the final instalment has been paid. That means your lender can repossess your car if you fall behind with payments. This condition may also be included on HP car finance agreements though.

3. Personal Contract Purchase

Personal contract purchase (PCP) is one of the most popular types of UK car finance options and for good reason.

Understanding personal contract purchase

Fixed monthly repayments are lower than HP loans, which allows you to consider newer, higher-spec vehicles without blowing the budget. You may need to make an initial deposit worth around 10% of the car’s value, and then you’ll continue to make repayments over the lifetime of the loan, usually between two and four years.

Balloon payments on PCP deals

When you’ve made your final instalment, you have the option to make a ‘balloon payment’ to gain ownership of the vehicle. The balloon payment is a final payment which covers the minimum future value of the car at the end of the PCP agreement. Another way of looking at it is that your monthly payments cover the car’s depreciation in value, while the final balloon payment covers the actual cost of the vehicle.

Alternatively, you can opt out of the large, lump sum payment. This will end your personal contract purchase (PCP) agreement, so you’re free to find a car elsewhere. However, you can also start a new PCP deal and swap the car for a new model, making PCP loans popular with motorists who like to change cars for the latest bells and whistles.

Guaranteed Future Value explained

Most PCP loans require you to estimate your expected annual mileage, which is used to calculate Guaranteed Future Value (GFV). This figure predicts the value of the car at the end of the loan based on a maximum annual mileage allowance. Without a mileage limit, it’s hard to predict how a car loses value as the same car would be worth a significantly different amount if it has been driven 50,000 miles or 15,000 miles, for example. As such, if you go over your pre-agreed mileage limit you may incur penalty charges as this reduces the guaranteed minimum future value.

4. Personal Loan

Few major purchases cost as much as a car, so it’s no surprise that a personal loan is another option to cover your payment to a car dealer or private seller.

Getting a personal loan to finance a car

Personal loans see you borrow the total amount needed to purchase a car, then pay back a fixed amount in monthly instalments. You’ll also have to pay interest on the amount borrowed, based on an annual percentage rate.

Advantages of a personal loan

You’ll own the vehicle outright, which makes a personal loan appealing to motorists who want complete freedom when it comes to mileage, wear and tear, customisation and other liberties. You’re also free to sell the car at any time with a personal loan. Borrowers with good credit profiles can generally unlock the best interest rates and personal loan terms.

5. Guarantor Loan

For borrowers with a bad credit history, guarantor loans are one of the most appealing car finance types in the UK.

How guarantor loans work

A third party, usually a family member, agrees to ‘guarantee’ the personal loan or car finance with a bank, finance company or car dealership and step up if you can’t make monthly payments. It’s a big responsibility for both you and the guarantor and so shouldn’t be entered into lightly.

How does it differ from a personal loan?

This carries many of the same benefits as a personal loan, depending on who you’re borrowing from. A guarantor loan from a bank means the vehicle is fully paid, so you can make customisations or even sell it if needed. Bear in mind that your guarantor’s credit rating may also come into play when applying for this type of personal loan or finance.

6. Personal Contract Hire (PCH)

Also known as leasing or a lease agreement, personal contract hire allows you to rent a vehicle for the lifetime of the agreement.

How does personal contract hire work?

Contracts start with an initial cash deposit followed by low monthly payments to cover the cost of the lease. The value of your monthly payments is determined using your expected annual mileage and the length of your lease. This is because both variables play a big role in the value of the vehicle at the end of your contract.

What happens at the end of your PCH deal?

At the end of the agreement, you return the car to the dealer, with no option to purchase it outright. Most people choose to start a new PCH contract, which gets you the keys to a brand-new vehicle. If you love fresh leather seats, cutting-edge technology and that sought-after new car smell, you’ll love PCH loans.

Added benefits of PCH

You’ll also sidestep depreciation, as well as enjoy perks like breakdown cover, waived road tax and complete coverage under the manufacturer’s warranty. For legions of motorists, the hassle-free nature of PCH makes it one of the most desirable UK car finance types.

Beware the mileage limits

As you might expect, PCH deals come with strict mileage limits. That’s because this car finance option doesn’t include the option to purchase, so the vehicle will be returned at the end of your car loan. If you exceed your mileage allowance, you’ll need to pay additional charges to cover the unexpected depreciation to the car’s value. That said, it is still one of the most popular finance methods.

What’s the best type of car finance for you?

When you’re choosing between different car finance options, there are a few things to bear in mind.

Your credit rating

Firstly, your credit rating. If you don’t have a good credit score, you may struggle to get approved for personal loans. That means you’ll need to opt for one of the other forms of car finance.

Instead of an unsecured loan, drivers with a poor credit history can opt for PCP finance, hire purchase and conditional sale car finance deals. These are classed as secured loans because the vehicle is an asset for the finance company. In other words, it can be repossessed in exchange for outstanding finance.

Balloon payments

Another big consideration is the balloon payment. You may know already that you don’t want to own your next car outright. If that’s the case, it’s worth considering personal leasing as this could reduce your monthly costs for new car finance.

On the other hand, if you definitely do want to own the car outright, stick to HP or a conditional sale. An optional balloon payment offers you maximum flexibility, but can affect the way your finance company calculates your car finance deal. While monthly payments tend to be lower for PCP, the final payment is harder to factor into your finances than a manageable monthly payment. In contrast, a hire purchase repayment plan factors in the full value of the car from the outset.

Extra charges for car finance

Finally, there are extra charges. If you want to avoid paying more for high mileage, a hire purchase agreement or personal loan may be the best route. That said, you can find PCP and leasing deals with higher mileage allowances to suit your requirements.

Crunching the Numbers

Whether you’re attracted to the freedom and flexibility of hire purchase or love the idea of continually upgrading to new vehicles with a PCH contract, it’s important to crunch your numbers before committing to a finance agreement.

Up-front affordability

Firstly, there’s your up-front affordability. Bear in mind that a larger deposit can increase the likelihood of approval and potentially help you secure a better interest rate. You may also be able to use your old car for part-exchange with some dealers, which works as a type of deposit or addition to the amount you’re paying.

Car finance terms

Your initial cash deposit isn’t the only factor to consider when asking can I afford to buy a car? Financial factors like your credit score and borrowing history can influence how much lenders are willing to offer and the fixed interest rate available. You’ll also need to factor in variables like your preferred loan term, your budget for monthly repayments and the car’s purchase fee. Our car finance calculator can give you a better idea of the amount you’ll be paying based on your loan amount, repayment term and credit rating.

Future plans

Try to think about any plans you have over the agreed period. Can you continue to pay for car finance for 36 months or do you plan to move house in the next couple of years, for example.

Insurance for your financed car

It’s also worth noting that insurance is not included in most car finance agreements. As the registered keeper, you will need to arrange insurance for the duration of your car finance agreement, and afterwards if you’re paying the full value of the car. Car insurance is a significant cost to take on and may require you to opt for a cheaper vehicle to make car finance work for your budget.

Choosing Between Car Finance Types (UK)

With a good understanding of the different types of car finance in the UK, you can choose the best options for your unique situation. It’s always good to have experts on your team, which is where My Car Credit comes in.

As a car finance broker, we compare deals from a large panel of trusted lenders, so you don’t have to spend hours shopping around. Apply for car finance today using our online form and let us find the right deal for you without all the legwork.

Armed with a wealth of knowledge and experience, plus access to one of the largest panels of lenders in the UK, we help you narrow down your search and secure suitable loan terms and interest rates.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance options Jan24

Can I Buy a Used Car with No Down Payment?

Whether you’re purchasing a new or used car, it’s likely to be expensive. Very few people have the cash available to fund the purchase of a vehicle in its entirety, in which case car finance is an ideal option. As such, you may be wondering, ‘Can I buy a used car with no down payment?’.

There are a number of different car finance options available, from hire purchase (HP) to personal contract purchase (PCP) and personal contract hire (PCH). The most common way to secure car financing without a down payment is via PCP, but it will depend on the provider of your car finance.

This article will look at ways to secure no-deposit car finance, what you can expect from such a deal, and any potential workarounds.

Can you buy a used car with no down payment?

There are ways to secure car finance with no deposit (or ‘down payment’). Whether or not this is available for you will depend on what kind of car finance you’re looking for. Similarly, whether no-deposit finance is most appropriate for you will depend on your personal circumstances.

When you purchase a used car, you’re buying a vehicle that’s value has already depreciated. Any deposit that you need to pay on it will therefore be smaller than it would be where you purchase a new car.

If you opt for no-deposit finance, then you can expect to pay the same amount of money by the end of your car finance terms as you would if you were to make a down payment. That said, the lower your deposit is, the higher your monthly repayments will be. In short, no-deposit finance will end up with you paying higher monthly repayments, which you need to be sure that you can make before entering into the finance deal.

You can also expect to be paying a higher rate of interest if you do not put down a deposit. As a result, you can end up repaying more than what the car was originally worth just through this hike in interest.

It’s also worth bearing in mind that if you are looking for no-deposit finance, your lender will likely only accept you if you have a high credit score. Because you aren’t fronting the money for a down payment, you’re considered higher risk. As such, your credit score will need to demonstrate that you have a track record of making your repayments in a timely and efficient manner. You’ll also likely have to pass affordability tests, which car finance providers conduct in order to ascertain whether or not a borrower is financially able to make their repayments.

As such, whilst it is possible to secure a used car with no down payment, if you can front the money for that deposit when you initially purchase the vehicle, this will lower both your monthly repayments and your interest costs. It can therefore be more beneficial for you in the long run.

Alternative ways to finance your car

There are things that you can do to try and finance your vehicle.

If you can shop around, this will put you in a better place to negotiate. Familiarise yourself with the kinds of terms that you can expect, so that you’re in the most informed position you can be. Similarly, if you shop around for a cheaper car, you won’t need as much for a deposit.

You could also consider asking someone to co-sign your loan. You and the co-signer would need to be aware of the potential risks in entering this agreement, but this might be a way to secure car finance without a down payment.

Alternatively, you could delay the purchase of the car until you have the cash to make the down payment. Any deposit is better than no deposit, and you’ll have likely improved your credit score over that saving period too, which will make you a more attractive candidate for finance in the first instance.

Find out more about used car finance

If you have questions about no-deposit car finance, or want to find out what other deals may be available, you can contact My Car Credit today, or use our car finance calculator to check what kind of terms you can expect.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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What is CS Car Finance?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

deposit down payment Jan24 no deposit car finance

Is Car Finance a Personal Loan?

When you secure a car on finance, you’re borrowing money in order to pay for your new vehicle. You’ll then repay this loan via a series of pre-agreed monthly instalments.

There are different kinds of car finance that you can secure, and which one is right for you will depend entirely on your circumstances.

The language around loans and finance agreements can be confusing. This article is here to help you differentiate between them and decide what option is best for you.

What are the different types of car finance available?

If you are not a cash buyer, you’ll likely need to get a car finance quote and establish which finance option is best for you.

There are three main types of car finance:

Hire Purchase (HP)

With HP car finance, you’ll have the option of paying an initial deposit followed by a series of pre-determined monthly repayments. Because you will own the car at the end of an HP finance deal, your repayments are likely to be slightly higher than with PCP finance.

Personal Contract Purchase (PCP)

Unlike HP finance, with PCP finance, you don’t own the car at the end of the finance term. Think of it more like a long-term rental. You’ll pay an initial deposit and then a series of monthly repayments. At the end of the deal, you can return the car to the dealer or trade it in for another car. Or you can pay a lump sum in order to own it outright.

Personal Contract Hire (PCH)

The monthly repayments for PCH are lower than either HP or PCP, because you don’t own the car at the end of the finance term and are never its legal owner. You will pay an initial deposit and then return the vehicle to the dealer at the end of the term.

What is a personal loan?

As well as these three main types of car finance, you can secure a personal loan. A personal loan is a loan that allows you to borrow a specific amount of money. They’re available from banks and other lenders, and are unsecured, meaning that you don’t have to put up any other assets (such as your car or your house), in order to secure them. You’ll typically repay a personal loan over a longer period than any of the other finance options, but shorter options are available.

A personal loan can be used to finance a number of things. You can use a personal loan to finance the purchase of a car, but they’re not exclusively designed for this purpose.

If you do choose to use a personal loan to finance a vehicle, you’ll have the advantage of being seen as a ‘cash buyer’ by the dealership. As a result, you shouldn’t face any balloon payment or deposit. It also means that you own the car outright and will be able to sell it as and when you want.

What is a car loan?

A car loan is a type of personal loan and, as its name suggests, it is specifically designed for the purchase of a car (or another vehicle).

As with a personal loan, you will own the car outright with a car loan, and you shouldn’t face a deposit. You just have to budget for the monthly repayments on your car loan.

Is car finance, a personal loan, or a car loan right for you?

Whether a car finance deal, a personal loan, or a car loan is the right option for you will depend upon your circumstances. There are advantages and disadvantages to all three.

There’s also no hard-and-fast rule on which type of finance or loan deal is easier to secure – it will depend on your situation and the lender’s criteria.

With a personal loan and car loan, you own the car, and aren’t subject to any mileage usage. You can also resell the car whenever you want. You just have to ensure that you repay the loan in full and remember not to miss any repayments, which would impact your credit score.

Car finance tends to be more flexible, and you can choose to terminate the agreement early or purchase the car at the end of your term (depending on what option you settle for). That said, you may face mileage or other restrictions on usage.

Get a great car finance deal

If you’ve decided that car finance is the best option for you, My Car Credit is ready and waiting to find you a great deal. We compare finance across our large network of lenders to find deals that are tailored to each buyer’s budget, credit score and other requirements.

You can apply online and get an instant decision on car finance without impacting your credit score. If you have any questions about car finance and personal loans, our team are on hand to talk you through your options, contact us today on enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Check for car finance without affecting your credit score

Is There a Maximum Age Limit for Car Finance?

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Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance options car loan Jan24 personal loan

What’s the Best Type of Car Finance for Me?

Most Brits have heard of car finance but what many people don’t understand is that not all deals are created equal. There are loads of options out there, not just in terms of lenders but also the different types of car finance available. Whether you’re shopping for a brand-new model or a used car, knowledge is everything when it comes to choosing the best type of car finance.

That’s why we’ve put together this guide designed to help make smart and informed decisions. Read on to find out more about the different options available in the UK and how to select the best type of car finance for your needs.

Hire purchase (HP)

Hire purchase loans are often offered by dealers and are designed to get you behind the wheel of your new car ASAP. The loan is secured against the car, which means you don’t own the vehicle outright until you’ve made your final payment and cleared all outstanding debts. HP loans can start with a deposit, usually at least 10% of the total value of the car, but there are plenty of options for no-deposit car loans. You’ll then repay the remaining balance in instalments over the loan period, plus interest. When your loan ends and you’ve paid your final instalment, the car is yours.

You’ll love HP loans if:

You have your heart set on a vehicle

If you’ve fallen in love with a model and you know you want to drive it for years to come, HP loans can be a great way to stretch your budget further and own the car outright at the end of the loan.

Your deposit is small

It’s hard to save cash which is why HP loans are so popular in the UK. Some lenders require deposits of just 10%. This gets you into the driver’s seat of a new car ASAP and allows you to spread out the total cost of the vehicle over a longer and more manageable period of time. However, you don’t always need to pay a deposit.

You might not love HP loans if:

You’re on a strict budget

HP loans offer some great benefits but they’re not necessarily the cheapest option when it comes to monthly payments. If keeping your payments to an absolute minimum is a priority, you may prefer a PCP agreement.

Personal contract plan (PCP)

Like HP loans, PCP agreements start with a deposit. After paying the initial deposit you’ll continue to make monthly instalments over the loan period. At the end of the loan, you have the option to return the vehicle or purchase it outright by making a ‘balloon payment’.

You’ll love PCP loans if:

You like to upgrade to a new car frequently

If you’re the type of person who simply has to get their hands on the latest iPhone model the day it’s released, you’ll love the concept of PCP loans.

You might not love PCP loans if:

You plan to drive long distances

Many PCP loans come with mileage limits, which means you can’t exceed a certain figure on the odometer if you want to meet the conditions of your contract.

You hate cleaning your car

As well as mileage limits, PCP loans require a certain level of commitment when it comes to TLC. You’ll need to keep your vehicle in good condition to prevent penalties at the end of your loan.

Personal loan

Personal loans are similar to PCP agreements, though there’s no option to give back the vehicle at the end of your contract. Initial deposits are generally a little larger than PCP loans, however this often means your monthly payments are smaller.

You’ll love personal loans if:

You like to keep things simple

Personal loans are simple and easy, with minimal paperwork and a straightforward structure. If you’re looking for a fuss-free loan option that doesn’t involve much number crunching, a personal loan could be a good bet.

You want to own your car outright

If you want to own your car outright with zero limits on things like mileage and wear and tear, you’ll love the freedom that comes with personal loans.

You might not love personal loans if:

You have a lacklustre credit history

The nature of personal loans means lenders are a little stricter when it comes to your credit history. If your credit score leaves something to be desired, you may not be eligible for a personal loan. But don’t worry, there are still lots of other great options out there!

You have your eye on a luxury vehicle

If you’re eyeing up a luxury vehicle, a personal loan may not secure the cash you need to purchase it outright. Most lenders cap personal loans at around £25,000, making them unsuitable for high-value vehicles.

Personal contract hire (PCH)

The term ‘hire’ says it all when it comes to PCH loans. Under these leasing agreements, you’ll rent the vehicle for a predetermined timeframe, and then return it at the end of the loan. There’s no option to buy or sell the car, making PCH agreements ideal if you love new cars but hate the idea of depreciation.

You’ll love PCH loans if:

You have an excellent credit score

PCH loans have an air of exclusivity and are usually only available to borrowers with good or excellent credit scores. If you have a glowing credit history, taking advantage of PCH loan options could be the best type of car finance for you.

You might not love PCH loans if:

You want to ‘rent to own’

If you want the option to purchase your car at the end of your loan, a PCH agreement isn’t right for you.

You’re on a strict budget

PCH loans are amazing when it comes to getting behind the wheels of the latest models. However, they can cost more than other car options and may not be the best type of car finance if you’re on a strict budget.

You plan to travel long distances

Like other rent-structured loans, PCH agreements usually place limits on mileage and wear and tear. If you want the complete freedom to use the car as you please it may be better to opt for finance that allows you to purchase the car outright.

Choosing the best type of car finance for you

All in all, the best type of car finance depends on your specific circumstances and preferences. At My Car Credit, we’re committed to finding a great deal that’s suitable for all drivers, including those looking for car finance with a poor credit rating,

If you have any questions, you can email us on enquiries@mycarcredit.co.uk or chat to a member of our friendly team on 01246 458 810.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Am I eligible for car finance?

Can You Get Cars on HP with No Deposit?

What is a Guarantor Loan?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

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You don’t need an ‘excellent’ credit rating to take advantage of car finance payment plans. If you have a lacklustre score and want to know more about how to finance a car with poor credit, we have answers.

Step 1: Find your credit score

Step 2: Crunch your numbers

Step 3: Secure a lender